1. 7- 1 Copyright © 2012Pearson Education, Inc. Publishing as Prentice Hall i t ’s good and good for you Chapter Seven Customer-Driven Marketing Strategy: Creating Value for Target Customers

2. 7- 2 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Customer-Driven Marketing Strategy: Creating Value for Target Customers Customer-Driven Marketing Strategy Market Segmentation Market Targeting Differentiation and Positioning Topic Outline

3. 7- 3 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Market segmentation Dividing a market into smaller segments with distinct needs, characteristics, or behavior that might require separate marketing strategies or mixes. Market Segmentation

4. 7- 4 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Market Segmentation

5. 7- 5 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall In concept, marketing boils down to two questions: (1) Which customers will we serve? and (2) How will we serve them? Of course, the tough part is coming up with good answers to these simple-sounding yet difficult questions. The goal is to create more value for the customers we serve than competitors do

6. 7- 6 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Figure 7.1 shows the four major steps in designing a customer-driven marketing strategy. Market segmentation involves dividing a market into smaller groups of buyers with distinct needs, characteristics, or behaviors that might require separate marketing strategies or mixes. Market targeting (or targeting) consists of evaluating each market segment’s attractiveness and selecting one or more market segments to enter. Differentiation involves actually differentiating the firm’s market offering to create superior customer value. Positioning consists of arranging for a market offering to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers.

7. 7- 7 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Through market segmentation, companies divide large, heterogeneous markets into smaller segments that can be reached more efficiently and effectively with products and services that match their unique needs.

8. 7- 8 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Segmenting consumer markets Segmenting business markets Requirements for effective segmentation Market Segmentation

9. 7- 9 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Market Segmentation Geographic segmentation Demographic segmentation Psychographic segmentation Behavioral segmentation Segmenting Consumer Markets

10. 7- 10 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Market Segmentation Geographic segmentation divides the market into different geographical units such as nations, regions, states, counties, or cities Segmenting Consumer Markets

11. 7- 11 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Market Segmentation Demographic segmentation divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality Demographic factors are the most popular bases for segmenting customer groups. Segmenting Consumer Markets

12. 7- 12 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Market Segmentation Age and life-cycle stage segmentation is the process of offering different products or using different marketing approaches for different age and life-cycle groups Gender segmentation divides the market based on sex (male or female)

13. 7- 13 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Market Segmentation Income segmentation divides the market into affluent, middle-income or low- income consumers Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality traits Segmenting Consumer Markets

14. 7- 14 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Market Segmentation Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product Occasions Benefits sought User status Usage rate Loyalty status Segmenting Consumer Markets

15. 7- 15 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Occasion segmentation means grouping buyers according to occasions when they get the idea to buy, actually make their purchase, or use the purchased item. Benefit segmentation means grouping buyers according to the different benefits that they seek from the product. User Status means segmenting markets into nonusers, ex- users, potential users, first-time users, and regular users of a product. Usage Rate means grouping markets into light, medium, and heavy product users. Loyalty Status means dividing buyers into groups according to their degree of loyalty.

16. 7- 16 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Market Segmentation Multiple segmentation is used to identify smaller, better-defined target groups Using Multiple Segmentation Bases

17. 7- 17 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Market Segmentation PRIZM NE classifies every American household into 66 unique segments organized into 14 different social groups. These groups segment people and locations into marketable groups of like- minded consumers that exhibit unique characteristics and buying behavior based on a host of demographic factors Using Multiple Segmentation Bases

18. 7- 18 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Segmenting Business Markets Consumer and business marketers use many of the same vari­ables to segment their markets. Business marketers also use some additional variables, such as customer operating characteristics, purchasing approaches, situational factors, and personal character­istics. Many marketers believe that buying behavior and benefits provide the best basis for segmenting business markets.

19. 7- 19 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Market Segmentation To be useful, market segments must be: Requirements for Effective Segmentation MeasurableAccessible SubstantialDifferentiable Actionable

20. 7- 20 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Requirements for Effective Segmentation To be useful, market segments must be: Measurable: The size, purchasing power, and profiles of the segments can be measured. Accessible: The market segments can be effectively reached and served. Substantial: The market segments are large or profitable enough to serve. Differentiable: The segments are conceptually distinguishable and respond differently to different marketing mix elements and programs. Actionable: Effective programs can be designed for attracting and serving the segments.

21. 7- 21 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Market Targeting Target market consists of a set of buyers who share common needs or characteristics that the company decides to serve Selecting Target Market Segments

22. 7- 22 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Market Targeting Segment size and growth Segment structural attractiveness Company objectives and resources Evaluating Market Segments.

23. 7- 23 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall MARKET TARGETING Evaluating Market Segments In evaluating different market segments, a firm must look at three factors: Segment size and growth Segment structu­ral attractiveness Company objectives and resources The largest, fastest-growing segments are not always the most attractive ones for every company. The company also needs to examine major structural factors that affect long-run segment attractiveness.

24. 7- 24 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall A segment is less attractive if it already contains many strong and aggressive competitors. The existence of many actual or potential substitute products may limit prices and the profits. The relative power of buyers also affects segment attractiveness. A segment may be less attractive if it contains powerful suppliers who can control prices.

25. 7- 25 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Market Targeting Undifferentiated marketing targets the whole market with one offer –Mass marketing –Focuses on common needs rather than what’s different Target Marketing Strategies

26. 7- 26 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Undifferentiated Marketing Using an undifferentiated marketing (or mass-marketing) strategy, a firm might decide to ignore market segment differences and target the whole market with one offer. This mass-marketing strategy focuses on what is common in the needs of consumers rather than on what is different.

27. 7- 27 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Market Targeting Differentiated marketing targets several different market segments and designs separate offers for each Goal is to achieve higher sales and stronger position More expensive than undifferentiated marketing Target Marketing Strategies

28. 7- 28 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Market Targeting Concentrated marketing targets a small share of a large market Limited company resources Knowledge of the market More effective and efficient Target Market Strategies

29. 7- 29 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Concentrated Marketing Using a concentrated marketing (or niche marketing) strategy, instead of going after a small share of a large market, the firm goes after a large share of one or a few smaller segments or niches. It can market more effectively by fine-tuning its products, prices, and programs to the needs of carefully defined segments. It can market more efficiently, targeting its products or services, channels, and communications programs toward only consumers that it can serve best and most profitably.

30. 7- 30 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Marketing Targeting Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations Local marketing Individual marketing Target Market Strategies

31. 7- 31 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Market Targeting Depends on: Company resources Product variability Product life-cycle stage Market variability Competitor’s marketing strategies Choosing a Target Market

32. 7- 32 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Differentiation and Positioning Product position is the way the product is defined by consumers on important attributes—the place the product occupies in consumers’ minds relative to competing products Perceptions –Impressions –Feelings

33. 7- 33 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Tide is positioned as a powerful, all-purpose family detergent; Ivory is positioned as the gentle detergent for fine washables and baby clothes. At Subway restaurants, you “Eat Fresh;” at Olive Garden, “When You’re Here, You’re Family;” and at Applebee’s you’re “Eatin’ Good in the Neighborhood.” In the automobile market, the Nissan Versa and Honda Fit are positioned on economy, Mercedes and Cadillac on luxury, and Porsche and BMW on performance. Volvo positions powerfully on safety. And Toyota positions its fuel efficient, hybrid Prius as a high-tech solution to the energy shortage. “How far will you go to save the planet?” it asks.

34. 7- 34 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Differentiation and Positioning Positioning maps show consumer perceptions of their brands versus competing products on important buying dimensions

35. 7- 35 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall DIFFERENTIATION AND POSITIONING Value proposition: How a company will create differentiated value for targeted segments and what positions it wants to occupy in those segments. A product’s position is the way the product is defined by consumers on important attributes. Positioning Maps Perceptual positioning maps show consumer perceptions of their brands versus competing products on important buying dimensions.

36. 7- 36 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Differentiation and Positioning The differentiation and positioning task consists of three steps: Identifying a set of possible competitive advantages to build a position Choosing the right competitive advantages Selecting an overall positioning strategy Communicating and delivering the chosen position to the market Choosing a Differentiation and Positioning Strategy

37. 7- 37 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Differentiation and Positioning Competitive advantage is an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices It can differentiate along the lines of product, service, channel, people, or image. Identifying Possible Value Differences and Competitive Advantages

38. 7- 38 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Differentiation and Positioning Identifying a set of possible competitive advantages to build a position by providing superior value from: Identifying Possible Value Differences and Competitive Advantages Product differentiationService differentiationChannel differentiationPeople differentiationImage differentiation

39. 7- 39 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Choosing the Right Competitive Advantages How Many Differences to Promote Ad man Rosser Reeves believes a company should develop a unique selling proposition (USP) for each brand and stick to it. Other marketers think that companies should position themselves on more than one differentiator.

40. 7- 40 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Differentiation and Positioning Difference to promote should be: Choosing the Right Competitive Advantage ImportantDistinctiveSuperior CommunicablePreemptiveAffordable Profitable

41. 7- 41 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Which Differences to Promote A difference is worth establishing to the extent that it satisfies the following criteria: Important: The difference delivers a highly valued benefit to target buyers. Distinctive: Competitors do not offer the difference, or the company can offer it in a more distinctive way. Superior: The difference is superior to other ways that customers might obtain the same benefit. Communicable: The difference is communicable and visible to buyers.

42. 7- 42 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Preemptive: Competitors cannot easily copy the difference. Affordable: Buyers can afford to pay for the difference. Profitable: The company can introduce the difference profitably.

43. 7- 43 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Differentiation and Positioning Value proposition is the full mix of benefits upon which a brand is positioned Selecting an Overall Positioning Strategy

44. 7- 44 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Selecting an Overall Positioning Strategy The full positioning of a brand is called the brand’s value proposition. (see Figure 7.4) More for More positioning involves providing the most upscale product or service and charging a higher price to cover the higher costs. More for the Same positioning involves introducing a brand offering comparable quality but at a lower price. The Same for Less positioning can be a powerful value proposition—everyone likes a good deal.

45. 7- 45 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Less for Much Less positioning is offering products that offer less and therefore cost less. “Less for much less” positioning involves meeting consumers’ lower performance or quality requirements at a much lower price. More for Less positioning is the winning value proposition. In the long run, companies will find it very difficult to sustain such best-of-both positioning.

46. 7- 46 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Differentiation and Positioning Company and brand positioning should be summed up in a positioning statement. The statement should follow the form: To (target segment and need) our (brand) is (concept) that (point of difference). Developing a Positioning Statement

47. 7- 47 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Communication and Delivering the Chosen Position Choosing the positioning is often easier than implementing the position.

48. 7- 48 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Communicating and Delivering the Chosen Position Once it has chosen a position, the company must take strong steps to deliver and communicate the desired position to target consumers. All the company’s marketing mix efforts must support the positioning strategy.

49. 7- 49 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2012 Pearson Education, Inc. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall